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Workforce in midst of transition

Metroplan is a voluntary association of local governments that has operated by interlocal agreement since 1955. Originally formed as the Metropolitan Area Planning Commission of Pulaski County, Metroplan now has members in the six-county metro area and is the metropolitan planning organization for central Arkansas.

Part of the Metroplan mission is to provide information and staff resources to member governments, the business community and the public. To do this, Metroplan publishes Metrotrends twice year; the spring edition is the Demographic Review and Outlook. The Economic Review and Outlook is published in the fall.

A workforce in transition

Central Arkansas employment has grown slowly in the Great Recession’s aftermath. The region’s job-loss rate ran below the U.S. average during the crisis, and local unemployment has stayed below U.S. levels. However, the local job recovery has also run more slowly than average. The Little Rock-North, Little Rock-Conway region is unusually diverse, with a mix of industries that closely matches the U.S. average. During downturns, the region typically suffers less than average. But the diversity that is advantageous during downward trends is typically a handicap when things turn up, yielding slower economic recoveries.

A Shifting U.S. Economy

Over the past five years, the national economy has undergone a restructuring process. Some of the old “guaranteed growth” industries, like housing, land development, and the banking, finance and business service industries that fed them, have been among the slowest-recovering sectors. Manufacturing, long known for constant job cutbacks, plant closings, and off-shoring, is leading the U.S. economy out of recession. Cheaper domestic energy, more expensive international freight transport energy costs, and rising labor costs overseas have energized a minor boom in U.S. manufacturing. The low-skilled, labor-intensive manufacturing of the past is mostly gone, supplanted by a highly-skilled, more creative, flexible process. Pay rates are good, but the work requires a carefully-trained, specialized workforce. Due to automation, the sheer number of jobs in manufacturing is far smaller than in the past, with an emphasis on innovation, engineering and design. One of the incubator locations of today’s manufacturing renaissance in the United States today is San Francisco, where local craft knowledge and design talent are at the leading edge of industrial innovations.[1]

Yet much of the economy, locally and nationally, lingers in low-growth mode. One of the biggest recent problems has been the mismatch between job vacancies and unemployed workers. A study by the U.S. Bureau of Labor Statistics determined that the March, 2012 U.S. unemployment rate was 2.8 points higher than it should have been, based on existing job vacancies.[2] Normally, a higher job vacancy rate yields a lower unemployment rate. But since about 2007, the relationship between job vacancies and unemployment has shifted, with a wider gap between the two. The mismatch is greatest in construction, trade and transportation, and the leisure and hospitality industries. Another big change is that the overall rate of labor force participation has dropped. Some of those who lost jobs during the crisis gave up looking for work, while some younger potential workers never entered the labor force. While unemployment has come down, it remains at 7.5 percent nationally, well above its long-term average during the 1990s and early 2000s.[3]

Workforce Central Arkansas

The Central Arkansas workforce is similar to the national average, but with minor differences. Overall participation runs a bit higher: in 2011, about 65.6 percent of the population over age 16 was in the labor force, compared with a U.S. average of 64.0 percent. Central Arkansas men are more likely than the U.S. average to be in the labor force while they are young, but less so above age 55. Central Arkansas women participate at a notably higher rate than the U.S. average, especially in the youngest (16 to 24) age group. Even in older age groups, local females are about one percentage point more likely than the U.S. average to be in the labor force.[4]

The Diminishing Middle

Job polarization is another change sweeping the U.S. labor force. This trend refers to the growth in employment share of both low- and high-end jobs, at the expense of “middle” jobs. The nub of the problem is that a lot of middle- skilled “routine labor” occupations are being replaced by automation and computer software. Such “routine” jobs can include manual activities, like crafts, production and repair, as well as sales, office and administrative tasks. This means job growth has run faster in low-end (and low-paying) manual tasks that cannot yet be performed by machines, and the high-end, well-paid occupations that involve “non-routine” cognitive activity, like problem- solving, analytical skills, persuasion and intuition.

Trends in employment by occupation suggest this “middle- skilled squeeze” has been at least as prevalent locally as at the national level. The chart at right shows U.S. and Central Arkansas job change by occupation from 2007 to 2011. Local employment in the generally high-end occupations of management, business, science and arts climbed faster than the U.S. average. Jobs in natural resources, construction and maintenance - often involving lower and middle skill levels - dropped by 24 percent, compared to a U.S. average decline of 14 percent in these categories.

Enrolling for a Better Future

The Central Arkansas region has long stood out for having the state’s highest education levels, an advantage that correlates with the highest wages and incomes in Arkansas. An interesting trend is adult college enrollments - people over age 25 taking college classes. By this measure, the Central Arkansas region ran above the national average in 2007; by 2011 the region’s share had gained further over the national average. Many Central Arkansas residents have apparently decided they need better skills.

Staying Smarter than Computers and Robots

Better skills are good, but they must be the right skills. As machines continue replacing routine human tasks, the future of work is depending on “hyper-human” tasks, the things people do better than machines. These include emotional skills, intuition, imagination, and development of insights and hypotheses [6].

Implementation of these skills often conflicts with traditional worker attitudes, as well as workplace expectations and office cultures. It is therefore not surprising the transition is proving difficult, and may underlie the abnormally slow employment growth of recent years. The old factors in economic development, like low costs, good freight transportation infrastructure, and proximity to important markets, still matter but matter less. Creative industries demand positive human environments that nurture uniquely human skills. Regions rich in cultural amenities, recreational opportunities, and other “quality of life” measures, may hold an edge. But there will be no simple answers. Jobs of the future will require workers who self-motivate, stretch their imaginations, and move beyond assumptions of “business routine” that increasingly belong to the past.

1 - James Fallowes, “Mr. China Comes to America,” The Atlantic, December 2012.

2 - “Which Industries are Shifting the Beveridge Curve?” Monthly Labor Review, June 2012. In other words, the unemployment rate of 8.2 percent should have been 5.4 percent, based on job vacancies.

3 - U.S. Bureau of Labor Statistics, seasonally adjusted data for April 2013.

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